The U.S. and China are in the early stages of a long-term, protracted conflict otherwise known as ‘Cold War 2.0.’ I consider myself privileged to have spent 15 years in business development and hospitality operations in China and to be among the very few foreigners who have successfully created and scaled a hotel brand in the country and advanced its first Carbon neutral hotel. As an Asian born person, who is a dual Canadian and U.S. citizen, China gave me the exhilarating experience of being a triple immigrant. My years in China have made an indelible impact on my worldview or what Germans refer to as their “Weltanschauung.”
In 2015, when I was a China-based CEO, I attended a private lecture at the Harvard Club in Shanghai, which was hosted by Harvard Business School professor Warren McFarlan. He was brave enough to discuss his book Can China Lead?Reaching the Limits of Power and Growth on Chinese soil, albeit with a friendly audience. In his book, Professor McFarlan argued that China, “a country of engineers”, simply does not have the cultural or soft power to replace the U.S. as a superpower. I asked a few of my Chinese executives, including those from Taiwan and Hong Kong, to attend the briefing. Every country has its own propaganda and above all I was interested in the perspectives of our associates who were raised in the PRC. Several months prior to this event, our Shanghai-based finance and development team joined me on a tour of the Korean War museum in Seoul, which was one of the few times I saw them openly expressing their emotions about potential implications of being educated in China. They came away not knowing what to believe and those who remained committed to Beijing’s version of the events, shared an entirely different history about the war with Americans as the initial aggressor as it was widely taught in Chinese public schools.
2015年在我担任驻中国首席执行官期间,我参加了一场由哈佛商学院(Harvard Business School)教授沃伦·麦克法兰(Warren McFarlan)在上海的哈佛俱乐部(Harvard Club)举办的私人讲座。尽管参加讲座的都是友好的听众,当时他在中国的土地上讨论他的著作《中国能领导吗?达到权力和增长的极限》(Can China Lead? Reaching the Limits of Power and Growth)依然是勇气可嘉。McFarlan教授在他的书中指出,作为一个“工程师国家”,中国不具备取代美国成为超级大国的文化或软实力。当时我邀请公司的几位中国(包括来自台湾和香港的)高管参加了这次讨论会。每个国家都有自己的政治宣传,而我对成长于中国的高管们的观点尤为感兴趣。在这次活动几个月前,公司在上海的金融与发展团队同我一起参观了首尔的朝鲜战争博物馆,那是为数不多的几次我看到他们公开表达对在中国接受教育所产生潜在影响的感受。他们中有的在离开博物馆时持怀疑态度,而那些依然坚信中国政府所描述版本的人则对这一段战争历史有着完全不一样的认知,他们认为就像是被中国公立学校广泛教导的那样,美国人是最初的侵略者。
Professor McFarlan was not an ordinary professor: He earned three degrees from Harvard, wrote over 300 cases and served six years as co-director at the Case Development Center at the Tsinghua University School of Economics and Management in Beijing, a post co-funded by the CEO of largest U.S.-based private equity firm Blackstone Group. His book was not even published in China but he had the courage to share his views in private with HBS alumni working in China. In his presentation, McFarlan labelled China “a culture of engineers,” a country whose state-owned enterprises and political institutions were incapable of an equivalent transformation. McFarlan did not underestimate the rise of the capitalist class in China and the appeal of its model – which was based on replicating Singapore’s success by creating economic enterprise zones. Indeed, China’s path to capitalism was well-researched, methodical and modeled after the East Asian Tigers. However, if China could not lead, the implications were not good: it would either collapse like the Soviet Union, gradually democratize and play by our rules or its immaturity on the world stage would result in World War Three. It was not surprising that my Chinese colleagues brushed aside McFarlan’s research as culturally biased and short-sighted. After all, China was about to become the world’s largest economy by purchasing power parity, and it seemed industries like travel and hospitality were going to extraordinary lengths to win Chinese business and wallet share.
Then Prime Minister Lee Kuan Yew with Chinese paramount leader Deng Xiaoping in Beijing in 1985. LIANHE ZAOBAO FILE PHOTO — Photo by Mogul Hospitality Corp
Political cartoon, using Covid-19 virus as weapons — Photo by Mogul Hospitality Corp
In contrast, his peer, Harvard Professor William Kirby, a Sinologist by training, recently characterized the U.S-China relationship as a marriage rather than a rivalry. Kirby said the U.S. and China “are basically married: when one of us rolls over, the other falls.” From a purely empirical perspective, it is difficult to argue with his thesis. There is no doubt that the economic relationship between the U.S and China remains the world’s most important: By 2021, China owned $1 trillion or roughly 13% of U.S. national debt, second only to Japan. In December 2022, the total value of the U.S. trade in goods with China amounted to about $51.1 billion U.S. dollars composed of a $13.8 billion U.S. dollar export value and $37.3 billion U.S. dollar import value. Exports to China create 2 million U.S. jobs in sectors such as services, higher education, agriculture, and capital goods such as airplanes and semiconductor devices. Furthermore, the integration is much deeper after the global pandemic: the old adage that China is the factory of the world is misleading. The service sector, which includes financial services, travel, media, and technology, is now over 52% of China’s GDP (versus 67% for the U.S). The children of this marriage included the millions of Chinese students educated at top U.S. universities and they needed the parents to behave like grown-ups.
It turns out, both Professor McFarlan and Kirby are partially correct. According to state media, Xi told Trump in a phone call in March 2020 that US-China relations had reached an important juncture. Working together brings both sides benefits, while fighting hurts both. Cooperation is the only choice, he said. Xi hoped the US would take “substantive actions” to improve US-China relations to develop a relationship that is without conflict and confrontation but based on mutual respect and mutually beneficial cooperation.
Three years later, it’s evident that it was a rocky marriage to begin with and it is getting worse. The couple are on unbelievably bad terms, with very few political or business leaders openly advocating on each other’s side while a high barrier digital war is growing taller by the day, separating their civilizations. It is not the purpose of this writer to place blame on China, the U.S., international organizations like the WHO or U.N, or to analyze the underlying economic conflicts exacerbated used by the pandemic. The purpose of this chapter is to analyze how Western hospitality leaders and their shareholders, who have bet on local Chinese talent to grow their brands, can survive the storm and perhaps even capitalize on the decoupling between the U.S. and China.
Perhaps the inflection point was not digital war with Huawei or the Coronavirus. It was when CCTV and Tencent turned off the NBA, which had 500 million Chinese viewers, after a single tweet from a team owner supporting the Hong Kong protestors. Beijing’s disproportional response to a tweet and the NBA’s inability to engage in business diplomacy to overcome this incident and reinstate the single most popular sport in China (and a sport President Xi loves to watch when he is relaxing) was a clear signal that we were in a cultural war.
So, what does this mean for business leaders aspiring to build global brands in hospitality, retail, and other service sectors? Will Chinese consumers still seek American brands and content? Or will government initiatives push them towards alternatives? How can business leaders create value in the 2nd largest economy in the world which plays by a different set of rules? Is it time to exit or double down? Should brands even consider entering China?
Category-leading Western brands appear committed to the China market, less for supply chain but more for a sizable portion of their revenues, growth, and innovation. While the media likes to cover the supply chain, one thing continues to save the marriage from a bitter divorce: the Chinese consumer. Consumer interests are continuing to converge as tech savvy Chinese millennials are seeking the latest brand innovations. Pfizer, Apple, Nike, the NBA, Proctor and Gamble, Starbucks, KFC, Wyndham, Disney, General Motors, Intel, Microsoft, and LinkedIn are the agents of social integration and have spent decades investing in China. They are not going to walk away from doing business in China.
Opened in Dec 2017. Starbucks debut its Shanghai Flagship location with its Reserve Roastery, which exceeds its Seattle original in scale, expands over 30,000 feet. — Photo by Mogul Hospitality Corp
领先的西方品牌似乎对中国市场情有独钟,不仅仅是因为供应链,更看重的是中国市场的营收、增长和创新。虽然媒体喜欢报道有关供应链的话题,但有一个因素仍在继续挽救这桩婚姻:那就是中国的消费者。随着精通科技的中国千禧一代寻求最新的品牌创新,消费者的兴趣正在不断趋同。辉瑞(Pfizer)、苹果(Apple)、耐克(Nike)、NBA、宝洁(Proctor and Gamble)、星巴克(Starbucks)、肯德基(KFC)、温德姆(Wyndham)、迪斯尼(Disney)、通用汽车(General Motors)、英特尔(Intel)、微软(Microsoft)和领英(LinkedIn)等公司都是社会融合的代表,并且已经花了数十年的时间在中国投资。这些公司不会放弃在中国的商业发展。
It is not just the size of the Chinese market that remains attractive to these companies. The key advantages for China have been its relative ease of doing business and its cutting-edge infrastructure. But now it is China’s talent, which, despite rising labor costs, remains unrivaled in most measures of productivity. As large markets go, there are no alternatives to create shareholder value through innovation anywhere near China, which is automating its factories and production centers at a breathtaking pace.
This cartoon by David Simonds from The Guardian shows Cameron greeting an elephant, symbolizing India. Riding on the elephant are a group of Indian politicians and business people (note the factory). — Photo by Mogul Hospitality Corp
Despite recent initiatives to shift to an India-centric Asian supply chain strategy and the rise of Indian born CEOs in the U.S., there is no economic evidence its labor market and infrastructure provides a viable alternative to China. Furthermore, consider this list of companies that have exited one-sided joint venture deals in India, in the past few decades: Walmart, Hilton, IBM, General Motors, and DKNY to name a few. India still suffers from its hangover from 200 years of colonization with massive bureaucracy, high tariffs, poor infrastructure, and security risks. And its current administration is rated among the worst in democracies for freedom of the press and independent judiciary not to mention now touting eight of the top ten most polluted cities on earth.
Moreover, India is playing its old game of balancing Chinese interests with their American friends. China’s low-cost mobile phone company Xiaomi is India’s market leader and China is investing at least $15 billion a year into Indian companies in sectors such as pharmaceuticals. China also has its eyes on the big Indian prize: infrastructure.
The bottom-line is American companies have never succeeded in India. Now China is ahead of the curve in India. Even if China Inc falters, India is at least 50 years away from being an alternative to China for anything except talent acquisition or importing talent from India to the U.S.
Alternatively, outside the software and social media sectors, consider the success of these American-based companies in China:
Biopharma: Pfizer is China’s market leader in cardiovascular and antibiotics, has invested $1.5B in China, and is the country’s leading foreign biopharmaceutical company with four state of the art manufacturing plants and 11,000 employees in over 300 cities.
Sports: NBA China, the separate company the league set up in 2008 to manage its retail deals with Alibaba and a 5 year $1.5B content deal with Tencent, is now valued by the league at $10-15 billion. The league has offices in Beijing, Shanghai, Taipei, and Hong Kong, and nearly 500 million fans watched NBA programming on Tencent during the 2018-19 season and 21 million fans watched Game 6 of the 2019 Finals, according to NBA data. The league also has more than 200 million followers on social media in China. In March, the league opened the second-largest NBA store outside of North America in Beijing. Despite their current challenges, the NBA’s success in building the game in China is remarkable.
From the Economist, China’s Great Firewall is Rising — Photo by Mogul Hospitality Corp
Retail: Walmart, who committed $1.2B to build distribution and logistics across China in 2019 recently confirmed it is proceeding with investing $425mm in Wuhan in the next 5-7 years to open at least four new Sam’s Club stores, 15 additional shopping malls, and more community stores in the capital of China’s Hubei province. The U.S.-based retailer already has 34 stores and two distribution centers in the city.
Hospitality: Wyndham is China’s largest foreign hotel franchisor with over 1500 properties under six brands, and it expects to open 500 more hotels in the next 5 years. Starbucks, which has over 4200 stores in China and generated an estimated $2.9B in revenues, remains committed to investing $130mm to launch a global roasting facility in its coffee innovation park.
Education: U.S. universities looking for restoring revenues lost after Covid-19 will continue to seek out Chinese students. The number of Chinese students studying in the U.S. grew from 100,000 in 2009 to almost 400,000 in 2018, generating a significant source of revenue. While these figures have dropped after the pandemic to 300,000, Chinese students are still among the largest foreigners in the U.S., especially at its elite universities. Furthermore, according to Professor Kirby, this is an opportunity to improve the marriage: these are our children. What we need now are some really grown up parents.
The Game is Changing and It’s a Great Opportunity for New Entrants
游戏规则正在改变,这对新玩家来说是一个巨大的机会
That said, the legacy American hospitality brands that built their businesses in China are to going to face significant challenges. In the coming years, new local upstarts will emerge, and their brands will fall out of favor with the Chinese consumer. Only the incumbents who view the Chinese market as a source of talent innovations that can be shared and exported to their home markets, will survive. It is also likely that as Beijing’s priorities have shifted with higher importance placed on social purpose, environmental sustainability and the growth of domestic market consumption, a new generation of category leaders can seize the day and build profitable domestic businesses in China. For example, hospitality brands could focus more on local community initiatives supporting the 30 million migrant workers, mostly mothers who comprise nearly one-third of China’s hotel labor market and live apart from their families, with an annual trip home.
Moguls of Hospitality – Frontline Stories – Chinese Migrant Hotel Workers featuring Ms. Li – Housekeeper, Beijing, Ms. Zha – Housekeeper from Hebei, Ms Zheng - Housekeeper from Jilin Province China. Click on image to see short video. — Source: Mogul Hospitality Corp
Many of the leading global brands in luxury hotels, including Mandarin Oriental, Peninsula, Rosewood and Shangri-La are Hong Kong based. Seeking a path to recovery after the pandemic and Zero-covid, the newly elected Hong Kong government has also designated human capital in travel and hospitality as a high priority for its investment program matching ventures with industry corporates and investors in Greater China.
The massive government stimulus after the pandemic also represents a once in a generation opportunity for the most innovative U.S. brands to ramp up investing in China and targeting its domestic market. As part of its post Covid-19 stimulus plan, China will be investing trillions of RMB into service sectors. The ramped-up spending will aim to spur infrastructure investment, backed by as much as 2.8 trillion yuan ($394 billion) of local government special bonds.
If you have the courage to see through the politics and are considering scaling your brand globally, you should consider capitalizing on the coming economic recovery in China in the next 5 years. But how should a Western hospitality executive approach building a winning team in China? What does it take to succeed as an employer in China in 2023 and beyond? Having helped many Western brands enter the market and been the CEO of a Chinese based company that created a new category for domestic travelers, I will share my top 8 (lucky) lessons for how to win.
1. Build a Purpose Driven Brand/Zhenchendge/Wang Ming
建立目标驱动的品牌/真诚的/ Wang Ming
Elon Musk at Tesla Factory Opening Shanghai — Photo by Mogul Hospitality Corp
If your brand passes the Chinese measure of sincerity, or “Zhenchendge,” and makes a positive social impact and you are in it for the long term, consider expanding into China.
Chinese consumers have become more sophisticated, more worldly, and more socially conscious. President Xi’s anti-corruption and anti-consumerism campaign has been successful, and conspicuous consumption is out of favor. Chinese consumers, led by Millennials and Gen X/Gen Y, are seeking individualized experiences with authentic brands with a purpose and social cause.
This growing sense of regard for local brands comes despite years of mistrust in local producers, as a general sense of national pride is increasing alongside local quality standards. In many cases, China’s local brands are much more able to tap into local stories and narratives. Considering that the geopolitical tensions and even the recent coronavirus outbreak are further fueling this sense of national pride, it is likely that as well as catering to exciting and unique offline experiences, appealing to this new identity will be increasingly important.
In response to changes in Chinese consumer preferences and government policies, the market entry and development strategy adopted by these affordable, socially conscious brands is a throwback to the days before corporate globalization as we know it. They have adopted what Harvard Business School Professor Michael Yoshino calls a “multi-domestic strategy,” where China is treated as a distinct local market with local production and operations.
为了应对中国消费者偏好和政府政策的变化,这些具有社会意识的平价品牌所采取的市场进入和发展战略退回到了我们所知的企业全球化之前的时代。这些品牌采取了哈佛商学院(Harvard Business School)教授吉野幸男(Michael Yoshino)所称的“多国本土化战略”(multi-domestic strategy),即中国被视为一个拥有本地生产和运营的独立本地市场。
To build a winning team that grows a brand in China today, business leaders must develop a clear plan and message for how it will improve the country. Consider the case study of Tesla. Tesla invested $5 billion into its Chinese factory to sell cars in the country and Tencent is one of its biggest shareholders. No foreign company has invested in a bigger Chinese factory than Tesla, which aims to have 100% of parts locally sourced by 2023. Tesla is developing a Chinese design and engineering center to develop new cars specifically for the China market. Their approach to the China market has resulted in various concessions including tax credits, subsidies, faster approvals, and preferential loans. Prices for Tesla’s Model 3 sedans are similar to local manufacturers such as NIO Inc. and Xpeng Motors, while undercutting global players such as BMW and Daimler AG.
要在今天的中国打造一支能够实现品牌成长的成功团队,商业领袖必须制定一个清晰的计划和传达一个明确的信息,说明企业会如何助力中国的发展。以特斯拉(Tesla)为例。特斯拉(Tesla)向其中国工厂投资50亿美元,以在中国销售汽车,而腾讯是其最大的股东之一。没有一家外国公司在中国投资的工厂比特斯拉(Tesla)的更大,其目标是到2023年底实现100%的零部件在中国本土采购。特斯拉(Tesla)正在构建一个中国设计和工程中心,专门为中国市场开发新车型。特斯拉(Tesla)这种进入中国市场的模式为其获得了各种优惠,包括税收抵免、补贴、快速审批和优惠贷款。特斯拉Model 3轿车的价格与本地制造商如蔚来汽车(NIO Inc. )和小鹏汽车(Xpeng Motors)的价格相当,而要低于如宝马(BMW)和戴姆勒(Daimler AG)在内的全球汽车制造商的价格。
Many American legacy brands have found a 2nd life in China due to deep local partnerships, including General Motors (Buick is the #1 selling car) and Howard Johnson (which, almost extinct in the U.S., has over 100 five-star hotels in China). This has happened in large part because the local partners have made a positive social impact with local and provincial governments, are effective for their equity investors and lenders. In almost all cases, business leaders must maintain strong relationships with government officials who are measured on job and wealth creation and social capital. Having transformed their country, most Chinese business leaders are now motivated by “Wang ming” or a higher level of “total dedication.” Offering a brand or business that becomes a new global standard and improves the environment or has a positive social impact scores highest.
2. Many businesses and brands seek to enter the China market with a deal or project and set up an office in Hong Kong. This is the wrong mindset. Rather than executing a transaction, brands are better off setting up a listening post in mainland China to study and explore the market.
The era when you could simply do a deal and enter the market with a foreign brand are ending. The hotel industry is a case in point. According to C-Trip and the Chinese Tourism Authority, China’s domestic tourism spending was over $700 billion in 2019, almost 7 times its lauded $115 billion outbound travel spending. In this context, Chinese hotel owners are phasing out many full-service international brands and beginning to manage their own properties. Wanda, which currently owns hotels managed by IHG, Hyatt, and Hilton, in addition to Accor, is allowing existing contracts with foreign partners to expire, according to the Nikkei report, and will opt to self-manage any new hotels it develops under its own operating company. Capital Tourism Group, the listed arm of Beijing Tourism, China’s largest state-owned tourism conglomerate, is setting up its own chain of luxury hotels.
China is a 5000-year-old civilization but a very young country. Like most large countries, mainland China is very regional, diverse, and multi-cultural. For centuries it was a fragmented into fiefdoms, each run by its own warlord. Chinese people embrace foreigners who study their dynastic history, ethnic groups and language. A deep understanding of the ten languages and dialects, including Mandarin (Putonghua), Cantonese (Yue), Shanghainese (Wu), and others is just the beginning. Foreign business leaders should familiarize themselves with Chinese classic literature starting with the Tang Dynasty (618-907 A.D.) which included Lao Tzu, Confucius, and Mencius.
Any business leader who seeks to build a successful venture in China must possess an intellectual curiosity and passion for learning. A Chinese market leader must have a unique ability to understand patterns of thought and behavior or “Wenhua,” reflected in Chinese culture. This is imperative to understand the internal contradictions between authoritarian style communism and ruthless capitalism. It is imperative to travel across the regions, from Jiangsu to Fujian and Sichuan province and to 2nd and 3rd tier cities where most of the economic development is now occurring. Across regions, there is a wide diversity of work cultures and government roles in financing companies and approving projects and local business leaders. Each region has its own worldview and international trading and investment relationships.
3. Build Deep Partnerships/Jiao Pengyou (T’su-oh Pung-yoh-ou)
建立深厚的伙伴关系/交朋友
Excursion Hosted by Cachet Hotels Chinese Real Estate Owners in Baotou, Inner Mongolia — Photo by Mogul Hospitality Corp
In China, the expression “Jiao Pengyou” (“to make friends”) is critical. Friendships, or Youyi, are everything. Typically, its’ necessary to get introductions from third parties who are in favor and well acquainted with individuals you want to do business with, often through personal family contacts. This is different than the basis for relationships in the West. It is less about those similar interests and hard facts, and more about emotional intelligence. Youyi is typically facilitated by 3rd parties and is established in person through social engagements.
This is not to suggest that Chinese business leaders and state-owned enterprises are not intellectual or driven by knowledge, or “Shi,” evidenced by the culture of nation-wide testing, including in philosophy. The Chinese have extraordinary respect for knowledge. But Americans seeking to establish their business in China should shift their mindset away from cold data and hard facts that support a business case. If you approach a relationship, with a client, partner, vendor, or employee as a deal or a business case subject to western style universal ethics, you are not likely to succeed.
Confucius believed that people play by the rules because of their inherent virtue, rather than manufactured laws or “falv.” Even today, Beijing prefers to issue directives rather than write laws. Lawyers don’t play a significant role in Chinese business transactions or in managing conflicts once you’re in business. They typically show up at the end of a deal and do what they are told. Due diligence on new friends is not performed by accountants and lawyers, and business contracts may have little to do with how business may evolve in the future.
5. Budget Five Times Longer than Anticipated and Keep Negotiating/Tan Pan
留出比预期多五倍的时间并持续谈判
Signing Ceremony for Cachet Boutique Kunming with Developer/Owner in Yunnan Province — Photo by Mogul Hospitality Corp
Building relationships requires considerable time and money investment anywhere in the world. But in China, it requires numerous events, dinners, social functions, and numerous trips. If you’re in a hurry, it will be obvious, and the other side will either take advantage or just quickly extract information from you and declare victory. The Chinese like to negotiate or “Tan Pan,” even after the deal is signed. If you budgeted 2 months, assume it will take 10 months. The deal never ends, so appoint a relationship manager who has deal fluency and is bilingual. The Chinese version of the agreement is all that matters. And don’t be surprised if at the last minute you receive a message requesting more changes including a phone call or knock on your door right before a signing ceremony from a legal representative or translator acting on their own behalf to renegotiate. That has happened to me a few times and in retrospect it probably means I scored some points in the negotiation.
6. Keep a Close Eye on People but Practice Mianzi/Avoid Choh-ou
密切注意周围的人,给面子/避免让人当众出丑
President George W Bush Pulls on Premier Hu Jintao's Jacket Causing him to Lose Face after he was Denied a State Dinner and Referred to by the Announcer as the "President of the Republic of China" (Taiwan) instead of "The People's Republic of China" in 2015. — Photo by Mogul Hospitality Corp
Westerners believe in 360-degree feedback and are used to a “thick skinned” work environment where employees, business contacts, and government officials can be openly criticized. In contrast, the Chinese believe in Confucian-based harmony, “chou” or smelly criticism on an individual level can be dangerous and, when necessary, should be done privately and diplomatically. Criticism of government or public officials is considered treason.
The Chinese concept of “face” or Mianzi means respecting and complimenting others, so they give you face in return. One of the common issues facing foreign business leaders in China is how to address western definitions of conflicts of interest. In China, locals are often be on both or multiple sides of a deal. It is considered acceptable in business, especially if the parties are contractors or brokers. Certain foreign countries enable their companies to make investments that are illegal for U.S. companies. While the contractors and locals are under Chinese law and it’s hard to be sure who is doing what, make sure it’s clear where you stand but communicate it privately and diplomatically.
7. Enable “Can do” Chinese Partners to Innovate/Ganjin
激发“能干”的中国合作伙伴的创新力/有干劲
Located trackside at the Zhejiang Circuit, a premier motorsport destination in China. Cachet Boutique Shaoxing: 52 sleek guestrooms and suites, exceptional dining options, a rejuvenating spa and fully outfitted fitness center. Other pleasant diversions include acclaimed shopping centers, spacious auto showrooms — Photo by Mogul Hospitality Corp
There is considerable labor market innovation in China and in many industries, China is setting new global standards for quality led by the Ganjin, or new generation of entrepreneurs that number in the millions who have the ambition, courage, and strength to take risks.
The bottom line is American business leaders must protect their brands but not in the way they do back home. It’s best to keep standards and requirements at a high level and approach Chinese employees as a partner in innovation and brand building, not as a subsidiary branch created to harvest a brand, product or service made in the West.
Photographs of understated billionaires including Alibaba’s Co-Founder Jack Ma — Photo by Mogul Hospitality Corp
In 2019, the National Basketball Association (NBA) got into trouble after Houston Rockets General Manager Daryl Morey tweeted — and quickly deleted — a message of support for Hong Kong. NBA Commissioner Adam Silver issued contradictory statements defending the NBA’s stance to Americans and apologizing to the Chinese. With the blockage of NBA games from CCTV and Tencent this season, the most ardent Chinese observers have searched out “illegal channels,” such as pirated live streams offered by some sports booking services. When Tencent’s services were available, few bothered to watch the illegal content, which usually is of poorer quality. The fan demand is undeniable and once it resumes playing, the NBA will be back in China. But there is a big lesson here for American brands doing business in China.
In China, social change is a long and gradual process that is best handled privately and behind doors. A single, impulsive tweet from the equivalent of a brand leader did billions of dollars of damage to the NBA and its Chinese partners Tencent and CCTV.
Furthermore, discretion also requires leading by example. If you intend to build a brand or business in China, practice Confucian principles and blend in with the people. Make sure your car is the bestselling Buick mini-van and if you fly private, do not talk about it. Carry a Chinese phone so your local employees can communicate with you on WeChat.
I worked with many billionaires and princelings in China who dressed simply and did not travel with an entourage.
我曾与中国的许多亿万富翁和官二代共事,他们衣着简朴,没有随行人员陪同。
Conclusion: Calling All Disruptors - China is Back
结论:对所有创新者喊话——中国又回来了
Media event with Mark Wahlberg to celebrate launch of Wahlburgers Asia-Pacific JV with Cachet Hotels & Resorts – January 2017 — Photo by Mogul Hospitality Corp
The old expression “China is the factory of the world” no longer holds. Today, China’s GDP is driven by services, technology and innovation. In contrast to India, a new generation of leaders educated at top U.S. universities are coming back to China. Consequently, China has established leadership positions in many high-tech sectors including health care, biotech, social media, online education, human resources technologies, telecommunications, entertainment, and travel.
Similar to the post-2008 financial crisis, Beijing is aggressively investing in rebuilding the Chinese economy. The marriage between the U.S. and China is over and the process of decoupling has commenced, and it will negatively impact incumbent category leaders. The economic opportunity in China is bigger than ever and a new wave of innovation is coming quickly to serve a more sophisticated consumer who looks beyond social status and towards purpose-driven brands that make a positive impact on China and the world.